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Did Hedge Funds Make The Right Call On Broadridge Financial Solutions, Inc. (BR) ?

Debasis Saha

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtBroadridge Financial Solutions, Inc. (NYSE:BR) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Broadridge Financial Solutions, Inc. (NYSE:BR) was in 29 hedge funds' portfolios at the end of the first quarter of 2020. BR has seen a decrease in support from the world's most elite money managers lately. There were 35 hedge funds in our database with BR positions at the end of the previous quarter. Our calculations also showed that BR isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_26340" align="aligncenter" width="400"] Ken Griffin of Citadel Investment Group[/caption]

CITADEL INVESTMENT GROUP
CITADEL INVESTMENT GROUP

At Insider Monkey we scour multiple sources to uncover the next great investment idea. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than tripled this year. We are trying to identify other EV revolution winners, so we are checking out this tiny lithium stock. Keeping this in mind we're going to check out the recent hedge fund action encompassing Broadridge Financial Solutions, Inc. (NYSE:BR).

Hedge fund activity in Broadridge Financial Solutions, Inc. (NYSE:BR)

At Q1's end, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from one quarter earlier. By comparison, 26 hedge funds held shares or bullish call options in BR a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is BR A Good Stock To Buy?
Is BR A Good Stock To Buy?

The largest stake in Broadridge Financial Solutions, Inc. (NYSE:BR) was held by Junto Capital Management, which reported holding $69.4 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $46.5 million position. Other investors bullish on the company included Bristol Gate Capital Partners, Sunriver Management, and Diamond Hill Capital. In terms of the portfolio weights assigned to each position Strycker View Capital allocated the biggest weight to Broadridge Financial Solutions, Inc. (NYSE:BR), around 11.36% of its 13F portfolio. Sunriver Management is also relatively very bullish on the stock, designating 6.54 percent of its 13F equity portfolio to BR.

Judging by the fact that Broadridge Financial Solutions, Inc. (NYSE:BR) has faced a decline in interest from the entirety of the hedge funds we track, we can see that there were a few funds that slashed their entire stakes last quarter. It's worth mentioning that Renaissance Technologies said goodbye to the largest stake of the "upper crust" of funds followed by Insider Monkey, totaling about $15.9 million in stock. John Osterweis's fund, Osterweis Capital Management, also cut its stock, about $15.6 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 6 funds last quarter.

Let's go over hedge fund activity in other stocks similar to Broadridge Financial Solutions, Inc. (NYSE:BR). We will take a look at Teledyne Technologies Incorporated (NYSE:TDY), Nucor Corporation (NYSE:NUE), Baker Hughes Company (NYSE:BKR), and UDR, Inc. (NYSE:UDR). This group of stocks' market valuations resemble BR's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TDY,21,384671,-3 NUE,26,95527,0 BKR,30,281145,-7 UDR,19,249574,-2 Average,24,252729,-3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 24 hedge funds with bullish positions and the average amount invested in these stocks was $253 million. That figure was $307 million in BR's case. Baker Hughes Company (NYSE:BKR) is the most popular stock in this table. On the other hand UDR, Inc. (NYSE:UDR) is the least popular one with only 19 bullish hedge fund positions. Broadridge Financial Solutions, Inc. (NYSE:BR) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but still beat the market by 15.5 percentage points. Hedge funds were also right about betting on BR as the stock returned 33.7% in Q2 and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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Disclosure: None. This article was originally published at Insider Monkey.

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